HAIN Hain Celestial Group Inc

By Annie Gasparro 

Kellogg Co. said investments in new snacks and cereals are improving sales at the expense of profit.

The Battle Creek, Mich.-based maker of Special K, Pringles and Pop-Tarts, is making more single-serve snacks, developing recipes for healthier cereals and ramping up marketing.

That damped Kellogg's earnings in the fourth quarter. The company said Thursday that its comparable sales in North America fell 2%. Adjusted operating profit declined by about 13%, excluding foreign-exchange effects related to its Canada business.

Kellogg's shares, which have fared better than those of its peers in the past year, fell 5% in early trading on Thursday.

Shares in Hain Celestial Inc., meanwhile, fell nearly 18% on Thursday after the maker of natural and organic snacks and household products reported an unexpected loss in its latest quarter.

Hain long dominated that trendier area of the market but has lost ground over the past few years as competition from Kellogg and others intensified.

Hain said sales in its last quarter were $584.2 million, short of analysts' target for $612 million. The company's projections for earnings this year also fell short of expectations.

Kellogg said its expenses will drop later this year as it begins making new single-serve snacks in its own factories. Kellogg also expects to offset rising trucking costs, which hit record highs last year, with productivity savings. The company said its adjusted operating profit will be flat this year, excluding currency fluctuations.

Kellogg has been working on raising the average prices of its products through new flavor and size varieties that generate higher profit margins. It expects that to help its comparable sales rise 1% to 2% this year -- a marked improvement from last year's flat results.

Kellogg said some of its brands, such as Pringles, Cheez-It and Rice Krispies Treats, are growing while cereal consumption continues to struggle in the U.S. But some of its brands like Frosted Flakes and Froot Loops are outperforming the rest of the cereal aisle.

To boost sales, Kellogg branched out in 2017 and bought the clean-label protein bar brand Rxbar for $600 million.

It is also considering selling its Keebler cookie business so it can focus on other brands that are more central to its strategy.

For the fourth quarter, Kellogg reported revenue of $3.317 billion, a 4.2% rise from the year-ago period and just shy of analysts' $3.3199 estimate. Earnings per share, adjusted to exclude one-time charges, fell 2.2% to 91 cents, topping analysts' 88-cent target.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

February 07, 2019 10:13 ET (15:13 GMT)

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